DTN Fertilizer Outlook

Wholesale Fertilizer Price Outlook Mixed

3/6/2018 | 1:24 PM CST

This chart shows the weekly FOB (free on board -- the buyer pays for transportation of the goods) price of DAP at New Orleans, Louisiana. (Chart courtesy of Fertecon, Informa Agribusiness Intelligence)

Here is a breakdown of wholesale prices and trends of the various fertilizers:

AMMONIA

International: Global ammonia prices continued to slide steadily downward in February despite the shutdown of two ammonia plants in Trinidad (the largest ammonia exporter in the world).

The uptrend in phosphate fertilizer prices failed to boost ammonia values, and the latest cost and freight (CFR) Tampa settlement for March deliveries was agreed with a $35 cut from $340 to $305 per metric ton (mt) CFR.

Yuzhnyy, Ukraine, may have overcome short-term pressure for March with availability seemingly allocated to Belgium, Tunisia, Morocco and India. Demand from Ukraine, however, is said to have fallen to zero as the nitrates market draws to a close, and so pressure may come later in March to find additional outlets. Ex-Yuzhnyy metric tons are currently priced at $250-$260 mt FOB (free on board -- the buyer pays for transportation of the goods), compared to $290-$300 at the end of January.

The Middle East is relatively tight, although there are excess metric tons from North Africa and Southeast Asia looking for homes that are able to make up the difference. Middle East FOB prices ended February at $295-$320 mt, down from $315-$340 at the end of January.

The outlook remains fairly bearish with the nitrates season in Eurasia due to come to an end and also new ammonia projects in the U.S. and Indonesia scheduled to come online in the second quarter.

Domestic: Little is changed in the U.S. ammonia market with activity seasonally slow both on the purchasing and application fronts.

In the middle of February, domestic producer CF lifted its Corn Belt spring offers by about $20, to $440-$450 per ton (t) FOB. Other suppliers have also lifted their offers to similar values. Sales at this level have been minimal, as most retailers have already brought in enough supply to begin the spring season. Sellers expect to achieve these higher values once buyers return to the market for residual needs. Prompt tons are running at about a $20 discount in the $420-$425/t FOB Corn Belt range.

Ex-plant prices in Oklahoma are steady to slightly firmer around $390/t. Wholesalers in eastern Colorado, Kansas and eastern Missouri reported limited demand. Field temperatures are workable; however, much of the region is too dry and many buyers find prices unattractive. The region saw strong demand last fall for ammonia applications, and so far, this appears to be cutting into spring volumes.

The outlook for domestic ammonia prices is stable. The weak international market will start to put pressure on domestic prices. However, the spring application season will soon be underway, which should counteract this. The weather this spring and the corresponding level of demand will be the deciding factor for prices during the season, but lower prices are certainly expected for summer fill.

UREA

International: India took center stage in February with Metals and Minerals Trading Corporation (MMTC) holding an import tender for shipment from load port by mid-April. The tender saw low offers at $272 mt CFR West Coast and $277 CFR East Coast, up $12-$13/mt from the last tender held in December. Several companies took the counter at this price, and MMTC is understood to have awarded around 600,000 mt -- 417,000 mt Iranian product and the remainder from the Arab Gulf.

Brazilian demand is subdued following strong imports in December, with only small volumes reported changing hands in February. This pushback from Brazilian buyers has kept Middle Eastern producers in check. Middle East FOB values are flat month-over-month at around $260 mt FOB.

FOB prices in North Africa firmed to $270-$275 mt FOB, from $260-$271 last month, which is to be expected since Europe, its key destination, is preparing for the spring season. However, extra Ukrainian tonnage from Odessa Port Plant (OPZ) restarting should provide more competition in Turkey, its other key market, moving forward.

There is still upside potential in the urea market, but it is countered by Brazil pushing back on offers. Small increases are likely to continue in March given the strong import line-up for the U.S. and absence of Chinese metric tons in the export market.

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Domestic: Market participants at The Fertilizer Institute's annual conference in San Diego, California, in early February were cautiously optimistic that urea prices will move higher this spring. New domestic production has not contributed as many tons as expected and imports have been reduced, so many believe that urea supply will be tight this spring.

New Orleans, Louisiana, (NOLA) barges traded as high as $260/t FOB following the India tender announcement but ended the month trading at $250-$258, up slightly from $245-$255 at the end of January.

New warehouse sales are slow as buyers continue to take a wait-and-see approach. Some retailers are buying small volumes to cover nearby demand. Rain and cold weather across the Corn Belt has reduced the chance for an early start to spring applications. Most river terminal prices are in the $280-$290/t FOB range, up about $5 from last month.

OCI, a global producer of natural gas-based fertilizers based in the Netherlands, is shipping 50,000 t of urea to the U.S. from Egypt. The tons have been committed to meet previous domestic sales. The producer is focusing on UAN and DEF production at its Wever, Iowa, plant.

Koch's new urea line at Enid, Oklahoma, is still heard to be down. No timeline has been heard for restart. The producer was rumored to be looking to place one to two urea cargoes out of Africa for the U.S.

Dakota Gasification reports it has achieved its nameplate production of 1,100 tons per day of marketable urea at its new urea plant in Beulah, North Dakota.

The domestic outlook for urea prices is stable; however, there is further upside potential if domestic production problems continue.

UAN

Domestic UAN prices firmed in February on the back of strong urea prices. CF increased its UAN offers for March and the second quarter following The Fertilizer Institute's conference. The producer generally made increases of $15-$20 for March and introduced April/May offers $5 higher. Other suppliers have followed suit and upped their prices to similar values.

New sales at the higher price level have been minimal so far. Most buyers are comfortable enough with previous purchases to begin the season. The rains have pushed back any nearby potential application activity in the Corn Belt. The moisture should, however, be better for fertilizer demand for wheat acres in the west.

The Cincinnati FOB market moved up $15, to $200-$205/t, for 32% but remains the most competitive domestic price. Most other river terminal markets are around $210-$215/t FOB for March and $5 higher for April/May. Lower Mississippi terminals only moved up about $10 to $200-$210/t FOB.

Notably, CF moved its Port Neal, Iowa, ex-plant price up about $30,to $230-$235/t, for March with April/May $5 higher. Meanwhile, on the other end of the state, CVR is heard to be posted at $215/t FOB Dubuque.

Ex-plant prices in Oklahoma were up $15-$20 into the $200-$205/t FOB range. There were very few new sales, as application work in the Central and Southern Plains stalled mid-month due to freezing rain and excessive wind. Overall, wheat top-dress UAN demand has been weak due to the drought conditions.

CF posted its Gulf Coast price up $20 to $210/t FOB Point Comfort, Texas. Other suppliers have also increased their offers. Application work along the Texas coast and in southeast Texas has been spotty so far due to rain.

At NOLA, March barges traded up $10 from last month to $180/t FOB, and sellers are now looking to achieve $185.

No new import business has been confirmed concluded on the East Coast; however, most indications put the market in the $203-$205 mt CFR range, up $10 from last business. CF was heard offering $205 mt CFR East Coast in recent weeks, and Baltic producers were also at that level. Buyer interest has been subdued, mostly due to recent rain and wintry conditions in the east eliminating potential in the near-term for fieldwork.

Following the recent price increase, the short-term outlook for UAN prices has become stable to firm. Sellers are likely to achieve this higher level when buyers return to the market for residual needs, as long as urea prices continue to run stable to firm.

PHOSPHATES

International: Global phosphate prices firmed in February against a backdrop of supply-led strength but on limited trading volumes. The sentiment continues to be firm with producers claiming to be comfortable with forward commitments. But there are some bears creeping into the forward markets.

Following the closure of Mosaic's Plant City, Florida, facility in December, U.S. DAP/MAP prices have moved up to $410 mt FOB on the export front this month, against $395 at the end of February. North American demand has also been healthy, with prices for DAP and MAP barges increasing up to $375-$380/t FOB NOLA and $390-$395, respectively, encouraging additional Russian, Moroccan and Saudi Arabian imports.

Ma'aden in Saudi Arabia has been running at much lower rates than market expectations, adding to the tighter market. Chinese producers have also been running at lower levels, largely for seasonal reasons. This is allowing for producers in various regions to secure higher returns of up to $400 FOB in Russia, $411-$419 FOB in Saudi Arabia, $400-$410 FOB in Jordan, $410 FOB in Mexico, and as high as $432 FOB in Morocco.

However, as prices rise further, there is some concern that extra product from additional sources may be offered and that this could start to threaten the world balance going forward. There is also concern over demand in India. Most importers in this market are cautious about committing to additional tonnage at this stage, as subsidies remain uncertain and, in turn, likely local DAP pricing and consumption levels.

Therefore, the outlook remains firm in the short term on continued tight supply. However, in the medium term, prices look to be determined by India, who will need to step in for substantial April product for prices to hold at current levels.

Domestic: U.S. phosphate prices firmed in February on continued tightness in supply following Mosaic's closure of its Plant City, Florida, facility in December. Also, demand is picking up as buyers look to cover nearby requirements.

Barge prices increased to $375-$380/t FOB NOLA for DAP at the end of February and $385-$395 for MAP, compared to $355-$365 and $380-$385, respectively, in January. The high price level has encouraged importers to book additional phosphate cargoes from Russia, Morocco and Saudi Arabia.

River terminal prices have risen to reflect increased replacement costs out of the Gulf. Most river markets are pricing DAP in the $400-$410/t FOB range with MAP around $420-$425.

In its fourth-quarter 2017 webinar, Canadian fertilizer company Nutrien, the world's largest producer of potash and second-largest producer of nitrogen fertilizer, presented three possible scenarios moving forward for its Redwater phosphate facility in Alberta. Two scenarios would involve the continued production of MAP. But the most likely way forward would be to repurpose the plant and ship finished MAP (likely from its Aurora plant) into its Western Canada retail facilities. If the company moved forward with that option, then Redwater would most likely be repurposed for increased ammonium sulphate production. However, this decision is yet to be made, and it would not likely come to fruition until the end of 2018 when the company's phosphate rock supply contract expires.

The outlook for phosphate prices continues to be stable to firm in the short term on the back of tight supply and the ramping up of end-user demand. However, there is more uncertainty in the medium term as the volume of imports coming in suggests importers expect a strong spring application, which may not come to fruition given how high fertilizer prices are.

POTASH

Domestic potash prices were steady to firm in February with little new business transpiring. Market participants are largely focused on getting product into position for spring rather than concluding new business. There is some field activity in the Southern Plains region; however, application has yet to really ramp up. Most Midwest retailers have yet to move through fill tons, so there has been little new buying demand.

River terminal prices are steady to firm from last month in the $265-$275/t FOB range. NOLA barge prices are slightly higher at $235-$240/t FOB, from $230-$240 in January.

In its fourth-quarter 2017 webinar, Nutrien said it plans to continue producing at six potash mines in 2018. The producer will, however, shift the capacity utilizations of its mines to become more efficient. This plan involves cutting back production at its high-cost Vanscoy, Saskatchewan, mine and continuing to ramp up production at its low-cost Rocanville, Saskatchewan, facility.

The outlook for potash prices is stable to firm heading into the spring season. However, dependent on the success of the spring season and if K+S Potash Canada's Bethune, Saskatchewan, product becomes available to the domestic granular market, lower prices are potentially on the horizon for summer fill.

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